Reports: Health Insurer Humana Considering Sale; Cigna Interested

Brian Bohannon/ Associated Press

Brian Bohannon/ Associated Press

Associated Press

Cigna's name surfaces — again — in industry speculation about big insurance company acquisitions

Only weeks after Cigna Corp. was mentioned as a possible target for acquisition by fellow Hartford insurer Aetna Inc., a news service reported Friday that Cigna itself had approached a third insurer, Humana Inc., about a possible deal.

Analysts have been discussing for a few weeks the possibility that large health insurers flush with cash may be hunting for a big acquisition. Deal-friendly low interest rates and expectations for another wave of consolidation also are fueling the speculation.

On Friday, The Wall Street Journal reported on the latest twist — that Humana, one of the nation's biggest health insurers, might be for sale. A Humana spokesman did not immediately return a call from The Associated Press seeking comment.

Also on Friday, Bloomberg News reported that Cigna approached Humana about a potential deal.

The reports follow a financial analyst's note in mid-May that told investors that Aetna was poised for a large acquisition and that Humana and Cigna were likely targets.

The analyst, Ana Gupte of Leerink Partners, wrote another note to investors Friday after the latest media reports. Gupte said that she could not confirm that either Cigna or Aetna had had preliminary discussions with Humana but that she would expect both of them — as well as Anthem Inc., parent company of Anthem Blue Cross and Blue Shield in Connecticut — to be interested in buying Humana.

None of the companies would talk about the matter Friday, and the report was strictly one analyst's informed view.

But it raised worries that...

A financial analyst who covers Aetna said this week that the health insurer is poised for a large acquisition and that Humana or Cigna are likely targets.

None of the companies would talk about the matter Friday, and the report was strictly one analyst's informed view.

But it raised worries that...

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She said Humana's Medicare Advantage franchise will spur acquisition interest.

Humana, based in Louisville, Ky., is the second-largest provider of Medicare Advantage plans, which are seen as a key source of future growth for insurers. Enrollment has already grown briskly the past several years for these privately run, federally funded versions of the Medicare program for people over age 65 and the disabled.

That's expected to continue as baby boomers become eligible for the coverage and as more companies drop retiree health benefits. The health care overhaul has chopped funding for these plans, but the worst of that has passed, and analysts see much less uncertainty in the future for the coverage.

Plus, insurers are gaining a better understanding of the health care overhaul, the massive federal law that has helped provide coverage for millions. They are learning that scale matters in terms of gaining negotiating leverage for rates over care providers.

"There's got to be another wave of consolidation that occurs, and our view is that Humana would either be the first to go or be one of the first to actually make an acquisition themselves," said Thomas Carroll, who covers the industry for the investment bank Stifel.

After rising almost 70 percent in just the past year, Humana shares saw the biggest jump in dollar value in company history following the Journal's report Friday. There were only three other instances in company history with a greater percentage jump.